I didn’t have time yesterday but I did want to remark on the FBI raid on President Trump’s residence at Mar-A-Lago. It pretty clearly is a “where you sit depends on where you stand” event. For some it’s proof positive that the United States has become a “banana republic”. For others it’s proof positive that it hasn’t.

My own view is that I think that clearing a former president’s private residence and office of classified materials should be so routine that it isn’t remarked on. I don’t buy into the notion that politicians can simply be trusted. I strongly suspect that no president of the digital age and possibly none before has been perfect in his handling of classified materials. With so many things being routinely classified these days it’s probably harder than ever.

It does highlight what I have said before about President Trump—that he was too ignorant of the federal government and the law and too arrogant to think that the law applied to him.

I also think there’s a risk of rather that it being a matter of “no president is above the law” to one of “no Republican is above the law”.

Finally, I think that those who see the outcome of such a raid being that President Trump is rendered ineligible to run again will be bitterly disappointed. It is already settled law that Congress does not have the authority to alter the requirements for the presidency by statute.

I was a bit surprised to find this article by Naomi Oreskes at Scientific American making an argument I have made around here from time to time:

At last year’s Glasgow COP26 meetings on the climate crisis, U.S. envoy and former U.S. secretary of state John Kerry stated that solutions to the climate crisis will involve “technologies that we don’t yet have” but are supposedly on the way. Kerry’s optimism comes directly from scientists. You can read about these beliefs in the influential Intergovernmental Panel on Climate Change (IPCC) Integrated Assessment Models, created by researchers. These models present pathways to carbon reductions that may permit us to keep climate change below two degrees Celsius. They rely heavily on technologies that don’t yet exist, such as ways to store carbon in the ground safely, permanently and affordably.

Stop and think about this for a moment. Science—that is to say, Euro-American science—has long been held as our model for rationality. Scientists frequently accuse those who reject their findings of being irrational. Yet depending on technologies that do not yet exist is irrational, a kind of magical thinking. That is a developmental stage kids are expected to outgrow. Imagine if I said I planned to build a home with materials that had not yet been invented or build a civilization on Mars without first figuring out how to get even one human being there. You’d likely consider me irrational, perhaps delusional. Yet this kind of thinking pervades plans for future decarbonization.

I’m generally accused of not taking technological change into account but that’s not true. I don’t think that the pace or nature of technological change are predictable. I can only think of a few cases of major investments being made on the basis of technology that didn’t exist but might. Each one of those examples involved governments spending millions or even hundreds of millions of dollars. I honestly don’t believe any private company can be expected to do that.

At Econlog Richard Fulmer provides an explanation for why a planned economy is impractical. Here’s his peroration:

So, assuming a lower bound of 18 years to determine the relative prices of billions of products and services, even if we could accomplish the impossible tasks of:

1. identifying all the world’s products and services,
2. creating a supercomputer, or computer array, big enough to handle the calculations,
3. creating a storage array big enough to handle the data, and
4. instantaneously acquiring and uploading all the needed data to our computer

the uploaded information would be out of date and useless years before the computer finished its work.

Keeping in mind that I don’t care for the idea of a planned economy, IMO it’s completely possible for such an economy to “work” depending on your operative definition of work.

If, for example, by “work” you mean that those doing the planning gain enormous power and, coincidentally, wealth, it’s completely possible. It has happened many times. Indeed, it’s happening now, cf. Venezuela. Some would argue the United States is such a planned economy.

If you mean is it possible for a planned economy to produce an optimized equilibrium in the sense of producing the maximum outputs with the maximum utility, it cannot work. A little economic education should convince you of that.

If you mean is it possible for a planned economy to produce a high degree of equal utility (in the economic sense) without optimizing production or utility, it can. The worst case scenario does that. I should add that’s something a market economy would not produce and does not promise to produce.

To take another example of a planned economy, quite a few people think the Chinese economy is working and hold it up as an alternative to what is referred to as “free enterprise”. I would submit that whether it is working or not depends solely on your operative definition and beyond that there’s no way to tell. It could be claimed that the present Chinese economy would have been more successful and produced better outcomes for more people if it had not been a planned economy.

If it is not obvious, the point of this post is that the objectives, i.e. the definition of “working”, for those who favor a planned economy and those who oppose such a thing may be very different. Without both of them being open about their objectives, I doubt it is possible to make an assessment.

One of the features of the Inflation Reduction Act of 2022 is that it authorizes Medicare to negotiate drug prices. The descriptions of this feature differ so drastically depending on whether the speaker is a Democrat or a Republican as to sound like two completely different bills. For Democrats is a cost/inflation control mechanism; for Republicans it increase the prices of drugs for seniors or make them entirely unavailable and it will reduce spending on R&D.

Who is right? Democrats? Republicans? Both?

I take a jaundiced view of pharmaceutical R&D, possibly because I know too much about it. I think that much of what’s called R&D isn’t R&D at all and the relationship between revenue and R&D is hard to ferret out but it certainly doesn’t increase in proportion to revenue. Oversimplifying a great deal it increases with inflation; marketing spending increases with revenue.

I also find it ironic that purported free traders defend one of the most highly subsidized sectors in the economy. However, I’m prepared to believe that if you spend, say, three times as much as would be the case without the subsidies that there will be some beneficial results achieved.

But in this post I’m looking for advice on whether to believe the Republicans, Democrats, both, or neither about the effectiveness of Medicare negotiating drug prices.

I wanted to share one tiny snippet from the New York Times editorial on Nancy Pelosi’s visit to Taiwan:

Treating China as a hostile power is a counterproductive simplification. The two nations occupy large chunks of the same planet. They do not agree on the meaning of democracy or human rights, but they do share some values, most important the pursuit of prosperity.

The uncomfortable reality is that the United States and China need each other. There is no better illustration than the cargo ships that continued moving between Guangzhou and Long Beach, Calif., during Ms. Pelosi’s visit — and will continue long after her return.

I question these premises on multiple grounds.

For one thing I don’t believe that the Chinese authorities hold the same view of prosperity that we do any more than we share the same view of democracy or human rights. I think they have made it abundantly clear that they see trade as a zero-sum game—one side wins and the other loses. Furthermore, I think they see prosperity as prosperity for themselves and their own families. Prosperity for the Chinese people as a whole is a means to an end and the end is power.

U. S. trade with China is about 3% of China’s GDP and IMO China is authoritarian enough that could be ended overnight.

Also couldn’t the same have been said of Nazi Germany? That is that we needed each other, shared the same planet, and had different views of democracy and human rights.

Is the same true of our need for China? I think we have forged that dependency link by link, yard by yard and girded it on of our free will over the last 35 years. If we have not realized that was a mistake, we should now. Reversing it will be a lot less fun than forging it was but it will result in U. S. prosperity that is considerably more widespread among our population and certainly a lot more secure.

The Senate has passed a slimmed-down version of President Biden’s Build Back Better bill. Richard Cowan, David Morgan and Rose Horowitch report at Reuters:

WASHINGTON, Aug 7 (Reuters) – The U.S. Senate on Sunday passed a sweeping $430 billion bill intended to fight climate change, lower drug prices and raise some corporate taxes, a major victory for President Joe Biden that Democrats hope will aid their chances of keeping control of Congress in this year’s elections.

After a marathon, 27-hour weekend session of debate and Republican efforts to derail the package, the Senate approved the legislation known as the Inflation Reduction Act by a 51-50 party line vote Vice President Kamala Harris cast the tie-breaking ballot.

The action sends the measure to the House of Representatives for a vote, likely Friday when representatives plan to reconvene briefly during a summer recess. They are expected to pass it, which would then send the bill to the White House for Biden’s signature. In a statement, Biden said he looked forward to signing the bill into law.

“The Senate is making history,” an elated Senate Majority Leader Chuck Schumer said, after pumping his fists in the air as Democrats cheered and their staff members responded to the vote with a standing ovation.

It’s being portrayed as a victory and it is a political victory of sorts. The Democrats were able to hold their own caucus in the Senate together.

But it really is a gamble. To understand why that’s the case you must first realize that even if it does, as expected, pass the House it will have little to no material effect by the time of the midterm elections. And the CBO and multiple other institutions have found that even when its effects begin to be felt it is unlikely to stem inflation especially in the short term.

Congressional Democrats are betting that the accomplishment of enacting the bill will energize their base sufficiently to blunt the expected Republican victories in November. that inflation, employment, and, of all things, the weather won’t get worse between now and November, and that the effect of the bill in energizing their own base will be greater than the effect of energizing the Republican base.

Maybe they’re right. We’ll see. You’ve got to be an optimist to be a politician.

Speaking of scarce resources and political instability, I found this article by Sean Carberry at National Defense on the issues with cobalt interesting, too:

Studies by minerals analysts and the U.S. government say that 70 percent of mined cobalt comes from the Democratic Republic of Congo, a politically unstable country with a well-documented history of poor labor and environmental practices in its mining sector. Almost all the cobalt mined there — usually as a byproduct of nickel or copper mining — heads to China for refining and processing. Currently, China processes about 80 percent of the world’s cobalt.

“The big issue is China and its influence over the DRC, and the fact that China understands better than the United States the need to have access to strategic materials,” said Martin. “China has not only been finding sources, it’s also been stockpiling, and that is just not something the United States has successfully done.”

On the contrary, the United States has sold off large amounts of its critical materials stockpile like cobalt over the last few decades.
According to “Revitalizing the National Defense Stockpile for an Era of Great-Power Competition,” a Heritage Foundation report released in January, the supply contained $22 billion worth — in today’s dollars — of critical materials in 1989. It’s now down to $888 million.

For some reason being dependent on Russia and China for a strategic material just doesn’t seem that prudent. Maybe it’s just me.

The author goes on to cite a memorandum recently issued by the Biden Administration:

According to the memorandum: “The United States depends on unreliable foreign sources for many of the strategic and critical materials necessary for the clean energy transition — such as lithium, nickel, cobalt, graphite and manganese for large-capacity batteries. Demand for such materials is projected to increase exponentially as the world transitions to a clean energy economy.”

The United States shall secure materials such as cobalt “through environmentally responsible domestic mining and processing; recycling and reuse; and recovery from unconventional and secondary sources, such as mine waste,” the memorandum states.

and points out that we just don’t have a lot of viable domestic sources of cobalt. Canada, Australia, and Indonesia are probably better prospects. Recycling sounds like a good prospect as well:

Where analysts see greater potential to kick the Chinese cobalt habit is by producing the metal through the recycling of batteries and production scrap and waste.

“It could potentially be a very big source of raw material in the near term,” Rawles said. “What you’re looking at is what we call ‘production scrap’ or ‘batteries scrap.’ And so that’s just either off-spec or just off-cuts of production of battery materials that will then get fed back into the battery supply chain.”

Then, as batteries age and are no longer useful in a car or other device, the batteries can be recycled to extract the cobalt and other minerals back out to create new batteries.

It will be about 10 years before the recycling market takes off, he added. “Then, of course, you have big volumes, and you definitely want to ensure that you can retain that, regionally process it and put it back into your own … battery supply chain.”

My offhand guess is that recycling effectively will require a lot more energy than buying Congolese cobalt from the Chinese. A lot more energy solves a lot of problems.

I found this article at Spiegel International by Monika Bolliger, Markus Brauck, Alexander Demling, Claus Hecking, Isabell Hülsen, Michael Sauga und Gerald Traufetter interesting. Here’s a succinct statement of the problem posed in the article:

Because this much is clear, even if one day there is a wind turbine on every field and a solar system on every roof: Germany will remain an energy-importing country.

and the twin challenges are replacing the oil and gas supplied by Russia and finding alternatives for the future. Algeria, Egypt, the United States, the Netherlands (hydrogen), UAE, and Australia. My guess is that it will be all of the above plus Russia. I’m skeptical that the Germans will be willing to write off the investments they’ve made in Russia.

A major factor consider is political stability. Until recently from that list I would only have named Netherlands, the U. S., and Australia as politically stable. Now I’m not sure about any of them.

Something that goes unmentioned in the article, apparently an assumption. Where will they get the rare earths to put “a wind turbine on every field and a solar system on every roof”?

I probably should post a guide to the titles I give to my posts. In general when I end a title with a question mark it’s because I’m not sure of the answer. That may not be the case from time to time—no system is perfect.

In yesterday’s post wondering if what I pointed to was indicative of stagflation several commenters rejected the idea vehemently, pointing to low unemployment which was reasonable enough. However, no one produced an alternative explanation for the extreme flatness of the curve for the last couple of years. As the complete series makes clear, that isn’t unprecedented. It happened in the mid-1970s, the early 1980s and the early 1990s and each time it coincided with recession.

If you have another explanation, please feel free to offer it in comments.